When I Had to Close My Restaurant Because of a New Competitor

I want to share this experience with you because I know it can be useful. 13 months after a new competitor arrived, I had to close the doors of a sushi restaurant.

Why did I close it?

There were several reasons… let me give you a summary:

The competitor was extremely large and came in with the force of an angry Mike Tyson, punching everyone in sight.

Basically, the smaller restaurants looked pretty weak by comparison.

Picture something like a boxing match between Mike Tyson and Goofy, Mickey Mouse's friend…

Even so, those who know me know I would not give up that easily, so I did exactly what I recommended in the article When the Arrival of a New Restaurant Can Affect Your Sales and put several thousand dollars to work trying to offset the problem.

For the first 3 months we saw revenue drop by about 30% because of how new the whole thing was, and afterward things stabilized and we were averaging between 90% and 95% of what we normally sold before Mike Tyson landed…

In other words, revenue was always down, but only by 10% or 5%…

Come on, it was no big deal, we could live with that…

We kept an eye on every move the competitor made, and that let us fight back, because we started innovating just the way they did.

We copied their interesting ideas, and so it would not look like we were copying them, we made fairly strategic changes, but we always tried to hurry so we could keep the same pace. And since we had always been a restaurant that implemented improvements, people did not find it unusual that we were rolling out new things at that moment, and if you add the fact that other competitors were copying them too, it all looked like normal moves in the sector.

I was investing about $3,000 to $4,000 a month in the battle, and we were able to figure out that they were investing around $12,000 a month in marketing and were averaging revenue pretty similar to ours.

Both figures came thanks to friendships between current employees and former employees who had left on good terms for reasons beyond their control and who later, thanks to their experience, had found an opportunity at the new restaurant.

But an amount like $12,000 a month “tells you a lot”…

That is, when you learn how much they were investing, you can get an idea that the company had plenty of capital available, even though it was a relatively small market compared with other types of restaurants.

Even though financially we had the ability to inject more money each month using profits from other restaurants, we were not going to do it, because the older you get, the smarter you become, and I was certain that the specific market for that restaurant was not the best and that a bigger investment was too risky.

Over time, that $12,000 a month was paying off.

They started to grow and to gain a good share of the market, and little by little we watched our monthly revenue fall month after month at an almost steady rate.

The restaurant was in a fairly popular shopping mall, in a restaurant area where, even though the mall was open only until about 9 p.m., that part of it stayed open until late at night.

Unfortunately for us, we were not wrong: the company had plenty of capital, because the final blow came when that mall opened a new restaurant zone that was much larger and much more attractive, where each establishment had a rent cost of $16,000.

The restaurant moved to that strategic zone and became much more appealing to sushi lovers.

But the main problem was not that, but rather that this strategic zone is a multimillion-dollar investment by the mall and has permanent advertising in the main newspapers, on the most popular TV channels and on hundreds of billboards in the most strategic areas, which makes it more and more popular and brings hundreds and hundreds of people through its doors.

Come on… let me save you the trouble, I will drive myself to the cemetery and bury myself…

I decided to close because the risk was too high; we were 2 months away from running into financial trouble.

It was no longer feasible to keep going…

And I was right, because in the following 8 months, 3 more competitors closed, and one of them ended up terribly in debt, and I found out not because he was my friend, but because he is the son of a childhood friend of my mother-in-law.

Now then…

Have you ever stopped to think about this?

I do not want to sound like a nag, but some people close a restaurant and, even though it feels like an emotional blow, they place the people somewhere else, jobs are not lost and nothing happens; sometimes you win, sometimes you lose, that is how business works.

But in your case, have you considered the possibility of an emergency situation like that?

I recommend you take action right now; do not wait for something like that to happen before you start acting. You have to make an effort and keep in mind that if your restaurant is small or midsize, you are at great risk with the possible arrival of a competing restaurant that is much larger and has more resources.

Work every day on getting better…

Keep in mind that at any moment a problematic situation can come up that will push you out of your comfort zone, and it is better to be ready.

As I have already mentioned, even though the possibility of a new competitor may seem remote, having that preventive attitude will, I assure you, save you a lot of headaches and a lot of debt, and it will also help you shield your business.

Because even if you prepare for a war that never happens, all that effort will still be useful to you.